Economic Transition and Change of Wage Structure

Abstract

Wage determining mechanisms in China transformed between its planned economy period (1949–1977) and economic transition period (post-1978). It is known that market mechanisms did not function during the earlier period, when the government priced both labor and capital. After 1978, Chinese government enforced the market-oriented reform, the state-owned enterprises could determine the wage and employment by themselves partly. Does the economic transition affect the wage determining mechanism changed in China? Chapter 2 aims to investigate the effect of market mechanism on wage determination throughout the analyses on the effect of schooling years on wage, and compares their changes for a long term (the period from 1989 to 2011). It is found that the impact of market mechanism on wage determination becomes greater with the progress of labor market reform, particularly for the period from 2009 to 2011.

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